California’s biggest home insurer is now facing one of the state’s toughest crackdowns in decades. The Washington Post reports that regulators have launched what they call a “major enforcement action” against State Farm over its handling of claims tied to last year’s Palisades and Eaton fires in the Los Angeles area, alleging that the company delayed, underpaid, or wrongly denied coverage—especially for smoke damage—in more than half of 220 claims reviewed. The California Department of Insurance says it found roughly 400 violations of state law and is seeking more than $2 million in penalties, plus the option to suspend State Farm’s license for up to a year, a step that officials say they haven’t seriously weighed after a wildfire in at least 25 years.
State Farm, which insures about a third of the homes involved in the LA fire claims, calls the move a “reckless, politically motivated attack that could ultimately cripple California’s homeowners insurance market” and rejects any suggestion of systematic mishandling, though it has agreed to some corrections and extra payouts. It labeled the state’s insurance system “dysfunctional” and said it has paid out more than 13,700 home and auto claims, to the tune of $5.7 billion, to those affected by the 2025 fires, per the AP. The clash lands as lawmakers push new rules requiring insurers to file disaster response plans, and as consumer advocates frame the state’s action as an overdue test of accountability in a stressed homeowners market.
